Piling on here …
I see a relatively simple set of possibilities here.
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One is that BOFI has some very serious problems and the whole thing may collapse like a house of cards. Just because outside investigators blessed things a relatively short while ago doesn’t guarantee that everything is clean, but it’s a pretty good assurance of it. But if things are bad, the share price could collapse quite horribly over the coming weeks/months, time TBD depending on how the digging goes.
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In another future scenario, the charges are discredited immediately and everything returns to the previous “normal”, except that some investors are left with a bad taste in their mouths and they’re more cautious about this stock … so the long-term hit on the shares is pretty small, but for the next few weeks/months there may be some limited impact on the share price.
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Finally, I see a third possibility, which I think is the most likely outcome. However, it is really a range of outcomes, and which part of that gray are we land on will determine the value of this investment, and I have no idea where that is. In this case, management is basically cleared of any “legal wrongdoing”. However, the way that they’ve handled this situation, and lingering uncertainties about it all (including management competence and the distinction between “legally” okay and behavior which is totally clean), leave the reputation of BOFI tarnished. Maybe as bad as KFC chicken in China (which has had a multi-year effect, and may never be reversed), maybe a Lumber Liquidators’ type effect, or maybe only a relatively small one.
The trailing and forward P/E ratios are quite nice right now, but those numbers depend as much on the E" as the “P”. And as to forward earnings (and hence the future 1YPEG), right now there is a lot of uncertainty about it, and the market hates uncertainty. If this isn’t resolved quickly, the share price will likely languish regardless of how it all eventually plays out. And in the case of a financial business (in this way, BOFI is quite different from LL and other cases), market uncertainty can potentially have a real effect on the actual business that BOFI engages in.
as always, i am full of carp
… still holding a few call options, thereby limiting my risk somewhat (now with 0.9% of my portfolio at risk, which will all go to zero if the share price isn’t above 100 by April)